AMEX, issuer of my favorite credit card, has been approved by the Fed to become a bank holding company. AMEX follows Morgan Stanley and Goldman Sachs on this road -- supposedly the road to a lower cost and more stabele source of funding.
I have heard several people say that one of the causes of the current crisis was the repeal of the Glass Steagall Act that prohibited commercial and investment banking being done in the same firm.
So let's see: Bear Stearns, Merrill, and Lehman, the three firms that fell, were pure investment banks (no commercial bank status). Citigroup and JP Morgan (Chase) are firms that combined investment and commercial banking and did not fail.
And now we have two of the remaining investment banks taking advantage of an open window to becoming banks, and even AMEX doing the same. They seem to think that stability comes from combining both activities.
Hmmm.....
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